How is getting “prequalified” different from being “preapproved”?
A prequalification letter means that a mortgage company or banker has looked at your finances and decided that you’re probably going to get approved for a loan through the company or bank. When you go to buy a house with just a prequalification letter, it isn’t a strong enough sign to the seller that you’ll be able to pay.
“Preapproval” means that the bank or mortgage company has done the due diligence of looking through all of your financial history and decided that you qualify for a mortgage of a specific dollar amount. In essence, your preapproval letter tells the seller: “I can buy your house, period. I’ll be putting down x amount of dollars, and here’s a letter showing that I’ve been preapproved and am a financially clean buyer.”
Once you’re preapproved and the seller accepts your offer, give your lender the particulars of the house so the appraisal can take place. Assuming the house appraises for at least the purchase price, the paperwork to close the mortgage will begin.
Nestpert Jeff D. Opdyke, author of Financially Ever After: The Couples’ Guide to Managing Money
See More: Buying a Home